Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service

Ernesto Dal Bó, Frederico Finan and Martín Rossi

No 6645, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study a recent recruitment drive for public sector positions in Mexico. Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized. Screening relied on exams designed to measure applicants' intellectual ability, personality, and motivation. This allows the first experimental estimates of (i) the role of financial incentives in attracting a larger and more qualified pool of applicants, (ii) the elasticity of the labor supply facing the employer, and (iii) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities. A theoretical model guides each stage of the empirical inquiry. We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity towards public sector work – i.e., we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power. Distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities.

Keywords: state building; state capabilities; state capacity; public sector personnel; bureaucracy; public service motivation; labor markets; wages; elasticity of the labor supply; personality (search for similar items in EconPapers)
JEL-codes: H1 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2012-06
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service (2013)
Working Paper: Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service (2012)
Working Paper: Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service (2012)
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